Enel Russia Presents 2016-2019 Strategic Plan

Published on Wednesday, 16 March 2016

The plan is aimed at maintaining business and financial stability despite the current tough regulatory and market landscape.

From 2017 onwards the company’s financial performance is expected to revert to a positive trend returning to a solid positive income mainly supported by expected growth in capacity payments and forecasted gradual economic recovery.

Enel Russia’s priorities for the plan period are further CAPEX reduction, strong focus on equipment reliability, continuing cost containment and debt structure optimisation.

Financial targets (billion RUB)

2016

2017

2019

EBITDA

10.0

15.9

16.9

Net ordinary income

0.5

6.1

7.6

Total CAPEX

26.1 billion RUB over 2016-2019

“In this challenging scenario which is affecting our performance, we will continue to focus on cost efficiency and CAPEX containment over the 2016-2019 period, with the aim of ensuring the financial solidity of our business and returning to a grow from 2017 onwards. The worsened economic situation and regulatory framework we faced last year had a negative impact on our 2015 financials, which despite positive operating results, higher availability of our generating fleet and a solid cost-containment program, are below the targets set forth in our previous strategic plan”

– Carlo Palasciano Villamagna, General Director of Enel Russia

Moscow, March 16th, 2016 — Enel Russia has today published its strategic plan for 2016-2019 as approved by the company’s Board of Directors.

Market environment and guidelines
The company’s 2016-2019 strategic plan is aimed at maintaining business and financial stability despite the current tough regulatory and market landscape. After a challenging 2015, we expect 2016 to be characterised by almost flat power demand, tariff growth containment announced by the government and a significant amount of new capacity coming into operation, keeping market prices close to 2015 levels. From 2017 onwards the company’s financial performance is expected to revert to a positive trend returning to a solid positive income mainly supported by the growth in payments for new capacity (DPM) and forecasted gradual economic recovery. In light of the above, Enel Russia has set the following priorities:

Further reduction of capital expenditures;

Strong focus on equipment reliability;

Continuation of cost containment initiatives;

Debt structure optimisation in line with the changing financial market conditions.

Earnings outlook

Throughout 2016-2019 Enel Russia will focus on assuring the reliability of its generating fleet, compensating for the gradual decline in output at conventional gas-fired units due to the impact from new entrants to the market. No new capacity additions are envisaged over the business plan period, with some minor decommissioning of outdated capacity expected at the Sredneuralskaya power plant.

On the costs side, the company will continue to implement its costs efficiency strategy resulting in average costs growing well below the consumer price index (CPI) over the next four years.

The Enel Russia 2016-2019 strategy envisages EBITDA targets at 10.0 billion RUB in 2016, 15.9 billion RUB in 2017 and 16.9 billion RUB in 2019. The slight reduction of 2016 EBITDA versus 2015 (10.8 billion RUB) is mainly due to the higher fixed costs stemmed from higher forecasted inflation in 2016. From 2017 onwards EBITDA is expected to gradually increase thanks to the improvement of coal spreads on the day-ahead market, an expected spike in the payments for new capacity (DPM) and cost containment initiatives. Under the 2016-2019 strategic plan, Enel Russia is expected to post a net income of 0.5 billion RUB in 2016 and continue growing from 2017 onwards, also supported by declining interest charges due to the restructuring of Enel Russia’s debt. As a result, net income in 2017 is expected to reach 6.1 billion RUB in 2017 and 7.6 billion RUB in 2019.

CAPEX

Planned capital expenditures for 2016-2019 are expected to total approximately 26.1 billion RUB, a significant reduction compared to the previous business plan (34.4 billion RUB for 2016-2019). The current CAPEX plan mainly addresses stay-in-business and mandatory investment projects, while the company will continue its work on the optimisation of overall investments.

The revision of capital expenditures and other optimisation activities under the 2016-2019 business plan will support the company’s free cash flow within the current challenging market scenario.

An Enel Group subsidiary, PJSC Enel Russia operates the following power plants: Konakovskaya GRES, Nevinnomysskaya GRES, Sredneuralskaya GRES and Reftinskaya GRES. The company’s total gross installed electrical capacity is 9,428.7 MW (equivalent to 8,878.4 MW net installed capacity) and thermal capacity is 2.382 Gcal/h. PJSC Enel Russia’s authorised capital is 35,371,898,370 roubles, which is divided into ordinary shares with a par value of 1 rouble. The Enel Investment Holding B.V. share in the company’s authorised capital is 56.43%, PFR Partners Fund I Limited’s share is 19.03%, Prosperity Capital Management Limited’s share is 8.23%, VTB Bank’s share is 3.87% and other minority shareholders’ share is 12.44%. PJSC Enel Russia shares are listed in Level 1 MICEX quotation list.
The company was established in Yekaterinburg on October 27th, 2004 as OJSC OGK-5. On July 7th, 2009 by the resolution of Annual General Shareholders’ Meeting the company was renamed OJSC Enel OGK-5 and on August 8th, 2014 the Federal Tax Service registered the new version of the company’s charter with the name OJSC Enel Russia. On June 25th, 2015 the company changed its legal type and was renamed PJSC Enel Russia.